CIRO says 'severe misconduct' misled client and led to significant financial loss
A former CEO, president, and majority shareholder of a Canadian mutual fund dealer was permanently banned and fined $400,000 following an investigation by the Canadian Investment Regulatory Organization.
A CIRO hearing panel established that Antony Kin San Chau had solicited and arranged for a client to loan money to a third party for his benefit and made misleading representations to a client to have the client loan money to a third party.
The complex circumstances surrounding the loan were detailed in the CIRO Decision Notice issued this month and relate to a $250,000 loan that one of Chau’s clients funded. The loan was facilitated by Chau and paid to another client who claimed he owned money to a “gang” and also owed money to Chau and others.
CIRO said that Chau told the lender that his client only needed a short-term loan while his assets were temporarily frozen and that the client had $1 million in AUM with Chau’s firm. He said the lender would receive a 10% return on the loan which he said he would personally guarantee. CIRO’s investigation found that this was not the case and that the client was in financial difficulty. Further, it found that Chau did not provide documentation or the borrower’s handwritten promissory notes until after repeated delays and follow-ups. Repayments were not made despite repeated promises.
The regulator said that the loan arranged by Chau was mostly to serve his personal interests and that the conflict of interest was not disclosed to the lender, who lost most of the $250,000 loaned.
It also said that Chau failed to cooperate with the investigation. This element of the panel’s decision accounted for $100,000 of the financial penalty.
Chau was already permanently banned from conducting securities related business while in the employ of or associated with any Dealer Member of CIRO registered as a mutual fund dealer. This followed his failure to disclose material information about the change of control of a registered investment firm. He was also banned for five years in 2022 after failing to address a slew of compliance failures.
